Title Insurance Claim Questions

[Courtney Debetaz]

Hello, 

Has anyone had to make a title insurance claim for an "Incomplete Title"? I recently went to sell my townhouse and a couple days before closing I was informed that I had an incomplete title. I bought a townhouse, that was once a condominum, many years ago and during the closing they are telling me it isn't either a townhouse or a condo. It was marketed to me as a townhouse and sold to me as one. There has never been an HOA or COA and all other owners agree. The title company stating this is say the dissolution was incomplete and the lots under the units must be subdivided and approved by the local gov't. Do I have a valid title claim here? I have filed one, but I do not know what to expect and the communication is lacking, to say the least. The sale fell through. I am hoping to be made whole because it seems that my only recourse is to sell to a cash buyer at a big discount.

Any advice on the claim process is greatly appreciated. 

[Peter Walther]

I handled title claims for various underwriters for a number of years and have never heard of an incomplete title but based on your description I can make a guess as to what the problem may be.  I'm not an attorney and this is just my opinion.

First, it appears you may be confused as to some terms.  A townhouse is a form of construction as is a single family detached home or an apartment.  A condominium is a form of ownership wherein an owner has fee simple title to everything inside the walls and roof of the unit and everything else is a limited common element or a common element with each unit owner having and undivided proportional interest in them.

When a condo is being formed the land being submitted to the condo form of ownership is is described in the Declaration of Condo.  The Dec also sets out the description of the units and the rights and responsibilities of the unit owners.  If at some point the owners of the units decide to terminate the condo there generally are state statutes which provide the steps to be taken to do so.  You don't mention what state the property is in but it's those statutes which describe the steps.  Based on your description those steps may not have been followed which may mean the condo still exists even though it has not been properly run.

I've seen this happen before most commonly it's when someone builds a building with two or three units and intends on selling them out and thinks doing a condo is the way to go.  Since the same owner owns all the units a Condo board is never established and run according to the statutes.  The the owner decides to sell the units and the buyers don't realize they bought a condo.

It's not possible to say if you have a covered title claim without seeing you policy.  For example, if the legal description on Schedule A reads Unit 1, XYZ condominium it may not be covered because you own what's insured.  In any case it's good you submitted a claim.  The worst the insurer can do is deny liability.  Most states have statutes that provide the insurer must communicate the status of it's investigation and it's coverage decision within a set to frame.  Follow up with them regularly until they provide an adequate response.

I hope this helps.